KUALA LUMPUR, Jan 3 — Foreign investors still have interest in Malaysia, albeit with an increasing focus on other asset classes particularly the bond market.

In November 2019, foreigners flocked into the bond market to the tune of RM8.1 billion.

MIDF Amanah Investment Bank Bhd Research (MIDF Research) in a strategy note said international funds sold RM11.4 billion worth of Malaysian equities in 2019, although it was much less compared with the more than RM15 billion foreign net outflow seen in 2015.

“Despite the small change in total foreign net outflow in 2019, Malaysia remains as the country with the largest outflow amongst ASEAN markets we monitor; however, this was no match for the massive foreign net selling of RM19.49 billion seen in 2015.

“Nevertheless, the percentage of foreign investors’ participation out of the total value traded in the market averaged at 29.8 per cent in 2019 versus 27.4 per cent in the preceding year,” it said.

Likewise, the percentage of volume traded by foreign investors out of the total market also inched higher by 2.3 percentage points, the research house said.

MIDF Research said international investors accumulated US$23.65 billion worth of local equities in the seven Asian markets that it tracks (South Korea, Taiwan, India, the Philippines, Thailand, Indonesia, Malaysia), the second highest in the past five years (from 2015 to 2019).

“Overall, international investors were net buyers in nine out of 12 months during 2019 with April recording the highest monthly foreign net inflow of US$10.33 billion in the seven Asian markets under our coverage.

“Going into 2020, assuming a baseline scenario in which the US-China trade dispute fails to achieve full closure and the East Asian region continues to be beset by the relative lack of liquidity-induced macro reflationary prospects, we foresee a situation whereby equities valuation would remain depressed,” it said.

Under such circumstances, MIDF Research added that the FTSE Bursa Malaysia KLCI )FBM KLCI) might see its valuation tapering towards the lower end of its historical range.

“Our baseline target for the FBM KLCI in 2020 is pegged to a price-earnings ratio of 16.5 times.

“With earnings per share for 2020 forecast at 101.8, we reiterate our year-end baseline target for the FBM KLCI at 1,680 points,” it said.

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